Be careful what you wish for. After years of slow or no growth, expansion in business investment has finally come, and it has fueled big gains for this year's Portland Business Alliance Top 10 Growth Award winners. CEOs are now facing the "good" dilemmas. Where to find quality people. How to hold onto market share. How to deepen the imprint of a brand.

Those questions have an aggressive bank CEO considering selling music at branch locations, a building contractor rating workers' technology skills and Freightliner's CEO, a few years removed from a billion-dollar loss and painful cost-cutting layoffs, talking of a possible worker shortage. The business cycle rolls on.
— The editors

2004 TOP 10 GROWTH COMPANIES
LARGE (more than 100 employees)	Revenue increase 2003-2004	Employment increase 2003-2004
Freightliner	27%	25%
Umpqua Bank	23%	22%
Market Contractors	33%	26%
MEDIUM (26 to 100 employees)
Oregon Aero	133%	106%
Oregon Financial Svcs. Grp.	58%	24%
Buena Vista Custom Homes	273%	61%
SMALL (1 to 25 employees)
Witham and Dickey	225%	67%
Daniel J. Edelman, Inc.	147%	267%
The Fruit Company	114%	111%
Convergence Networks	107%	144%

• LARGE COMPANIES

1 – FREIGHTLINER
Location: Portland
Years in business: 63
Revenue growth: 27%
Employment growth: 25%

Freightliner turns a big corner
In his last days as Freightliner CEO in mid-April, Rainer Schmueckle offered a warmer public face than he'd shown throughout his four-year tenure at Daimler-Chrysler's heavy truck division.

Schmueckle sat gamely for interviews in his well-appointed Swan Island office overlooking the Willamette River in Portland and stood briefly for pictures outside, though he's generally averse to the camera. And he seemed genuinely happy to announce the company's sponsorship of summer concerts in Portland parks, along with future collaboration with Oregon universities and donation of a fire truck to the state forestry department.

There was good reason for the intense, 45-year-old German to let his hair down. After posting a $1.2 billion loss in 2001 — Schmueckle's first year on the job — Freightliner earned its biggest profit ever in 2004, on revenue of $12.4 billion. "And we believe it's sustainable as we go forward," Schmueckle says. Credited in the late 1990s with turning around the rail division of Daimler Chrysler, Schmueckle seems to have done it again with Freightliner.

Schmueckle's softer disposition also offers a glimpse of Freightliner's future strategy. After cementing its place as the North American market leader in heavy-duty trucks, the company will try to build its brand in the Portland professional community. Over the next few years, incoming CEO Chris Patterson will add as many as 300 workers in business development, engineering and support.

"Over the years, we've evolved into more of a professional environment," Schmueckle says, noting that fewer than half of the company's 3,500 Portland workers spend their days on Swan Island assembly lines. When the economy peaked in the late 1990s, he says, "certain skills were hard to recruit. It's conceivable that we'll get into a similar situation four or five years down the line. That's why we'd like to improve our relationships with universities — for access to talent."

Four years ago, Freightliner execs were cutting jobs — 2,700 from the worldwide work force, including 700 positions in Portland. The business cycle downturn caught the truck maker with too much production capacity and a stock of used trucks bought back under sweetheart deals the company had made to build market share in the 1990s. After negotiating pay and benefit cuts with union workers here, Schmueckle was reluctant to return the worker concessions when the company was firmly in the black last year (unions did get some pay restored). Freightliner's focus on restructuring had already meant a cool relationship with city officials. And the stance on labor didn't endear it to activists, either.

But Schmueckle insists he's just being honest about economic realities. It costs $2,500 more to produce a truck in Portland than it does at other Freightliner plants in the United States, primarily in the Carolinas, he says, because of higher labor costs and longer distances to East Coast suppliers and markets.

"It's important that people in our plant recognize this and don't see [talk of higher costs] as just another way for management to maximize profit," he says.

Lately, the company has been making large expenditures off the factory floor: $1 billion on a next-generation, EPA-compliant diesel engine due out in 2007, and another $6 million on a wind tunnel in Portland. "That really shows leadership in the industry," says Jim Tipka, a former Freightliner executive who works for the American Trucking Associations. There's also a $50 million facility expansion on Swan Island in the works. Located close to the sleek Adidas America office complex, the new campus will be another play to attract Portland professionals.

"We want people who want to put their roots in the ground and stay here in Oregon," Schmueckle says. Except, of course, in the case of a peripatetic corporate turnaround artist. Schmueckle himself heads back to Germany this month to become chief operating officer of Mercedes' struggling cars division.
— Oakley Brooks

2 – UMPQUA BANK
Location: Portland
Years in business: 4 (in Portland metro)
Revenue growth: 23%
Employment growth: 22%

After five furious years of merging and acquiring, Umpqua Bank continued its expansion march in 2004 and experimented with new ways to make banking funky.

In July, it bought Northern California-based Humboldt Bancorp, a 27-branch company with $1.5 billion in assets. Umpqua also expanded by adding stores in Tualatin and Bend. It's planning more expansion in Bend, as well as in Medford, Bellevue, Wash., and Napa, Calif.

On the hip banking side, the company now has service specialists from Ritz Carlton training employees under the auspices of Umpqua's department of cultural enhancement. Umpqua CEO Ray Davis says the company is exploring new twists to draw people to its banking stores, which double as hang-out spots where customers can get coffee, watch TV and surf the Web.

"We're looking at music and stored-value cards," Davis says. In the age of online banking, people such as his son, in his late 20s, don't go to the bank. "So as we build new stores we have to give people new reasons to go there, and we'll be doing things that have nothing to do with banking."

3 – MARKET CONTRACTORS
Location: Portland
Years in business: 27
Revenue growth: 33%
Employment growth: 26%

John Boden's strategy to land construction contracts with big commercial customers has helped smooth out the cyclical fluctuations native to the construction business. But it's a constant battle to overcome the shortage of tech-savvy construction workers he needs. "It continues to be a challenge," he says.

Boden's Market Contractors has sought out and landed accounts with companies such as U.S. Bank and Pizza Schmizza, which guarantee repeat construction on branch locations. And that business has meant two big years back to back: The company was a Top 10 Growth Award winner last year.

But as the average age of construction workers continues to creep up, Boden is searching for people to run spreadsheets at jobsites and send photos across the Web.

"People who don't have tech literacy are going to become dinosaurs," Boden says.Market Contractors hired an HR specialist last year to help recruit new employees and test for technology skills. And the company is gearing up for another year of growth with a new client: a Canadian check-cashing and payday loan company that is just entering the U.S. market.

• MEDIUM COMPANIES

1 – OREGON AERO
Location: Scappoose
Years in business: 15
Revenue growth: 133%
Employment growth: 106%

Smarter than a speeding bullet
That call five years ago from a planner with the military's elite special forces didn't faze Oregon Aero CEO Mike Dennis. He'd learned to expect calls from unexpected people in high places, while crafting headsets and pilot seats over the years for clandestine military projects.

But Dennis was stunned by the challenge presented to him. The military's Kevlar battle helmet could stop a 9 mm bullet, but the blunt trauma was still enough to cause a fatal brain injury. Cut the blunt forces in half with a shock-absorbing system, Dennis was told. And, make the system waterproof for up to 12 hours in 66 feet of water. Nobody had ever come close to those specs.

But as with many of his other projects that focus on safety and comfort — from insoles that wick moisture, to safer crash seats for small airplanes — Dennis set off to write the recipe for another fix from scratch. "The thing about tackling something that can't be done is, if you figure it out, you get the market all to yourself," he says.

Dennis' solution for the military helmet fueled Oregon Aero's explosive growth over the past two years. After reaching sales of $7 million in 2002, revenue jumped to $12 million in 2003, then more than doubled to $28 million last year.

The company's success also seems to have hinged on Dennis' wife Jude's ability to hold the family-owned company together through the helmet system's five-year, $7.5 million R&D process. "It was a real stud in my shoe," says Jude, who plays the straight-laced general manager to Mike's mad inventor. She had already liquidated their house and furniture and moved with Mike onto a sailboat to help the company's bottom line.

Mike Dennis and his engineers eventually figured out how to construct the military helmet's liner to allow oxygen molecules in but keep water molecules out. The system of pads inside the helmet molds to the contours of the head without constricting blood flow. But under a massive blow, the material hardens to absorb the impact.

To demonstrate all that in a recent interview, Dennis set one of the pancake-sized pads on the conference table in front of him and threw a Mike Tyson-sized punch at it. If Dennis felt any pain or the foam pad depressed at all, neither was visible.

In the past two years, the military has purchased more than 400,000 Oregon Aero helmet liners for use in Iraq and Afghanistan. And the company has received a steady stream of e-mails from soldiers and surgeons swearing by the newly outfitted helmet.

The success of the helmet system hasn't surprised Dennis' longtime local colleagues.

"Most people would have decided, 'all the military contractors have addressed it before, and I'm just going to spin my wheels,'" says Van's Aircraft CEO Dick VanGrunsven, whose kit planes carry a crashworthy Oregon Aero seat. "But Mike says, 'There's nothing impossible until I determine it's impossible.'"

Now in the works at Oregon Aero, says Dennis: "Inflatable armor for gunners who sit on top of Humvees."
— Oakley Brooks

2 – OREGON FINANCIAL SERVICES GROUP
Location: Portland
Years in business: 115
Revenue growth: 58%
Employment growth: 24%

As far as Oregon Financial CEO Craig Chambers can tell, there's both a youth movement and a feminist movement going on within Oregon's closely held businesses.

Oregon Financial helps business owners and key employees set up retirement and succession plans. The company's mutual funds, life insurance and other products are in high demand as Oregon's family businesses grow and change hands.

"There's almost an empowerment movement going on — it's OK to be in a family business instead of being on the corporate treadmill," says Chambers.

Chambers is seeing a lot of Gen Xers at the head of this entrepreneurial charge. He adds that in five years, according to Oregon State University's Austin Family Business Program, 37% of Oregon family businesses will be run by women. And from his vantage point the trend of family business expansion, and demand for financial products, looks good; "It's wide open," he says.

3 – BUENA VISTA CUSTOM HOMES
Location: Portland
Years in business: 3
Revenue growth: 273%
Employment growth: 61%

Sales at Buena Vista Homes grew more than 5,000% in 2003. But 2004 wasn't bad either. The company put up 200 homes, doubling its total. Now, CEO Roger Pollock hopes to settle down with a more manageable building plan this year and ride out the coming correction in the housing market.

Buena Vista specializes in mid-range subdivisions at the urban edge, with 500 lots in Happy Valley in the Southeast Metro area, as well as in Beaverton, Wilsonville, Tigard and Sherwood's Cooper Meadow.

Pollock says he thinks the Portland Urban Growth Boundary will protect real estate values. However, he says, the real estate bubble will burst: "It's not a question of if, but when." So Pollock is minimizing Buena Vista's exposure by buying only finished lots that the company can build on relatively quickly. And, it will keep extra cash on hand. Overall, he expects that the 2005 new-home market in the region will remain "predictably steady."

• SMALL COMPANIES

1 – WITHAM AND DICKEY
Location: Portland
Years in business: 9
Revenue growth: 225%
Employment growth: 67%

Sailing on fickle political winds
As a commercial printer that contracts with the Democratic Party's campaigns, Witham and Dickey had its share of ups and downs in 2004. In the months before the general election, the company's sleek presses ran 24 hours a day, churning out posters, banners, yard signs and direct mailings for John Kerry's Oregon campaign and candidates in 13 other states. The printers' co-owners, Matt Witham and Bill Dickey, worked for 73 consecutive days leading up to Nov. 2, and their employees were logging 60-hour weeks.

"It is a nightmare; you're so dragged out during the political season," says Dickey, the company's VP. "Then, of course, in the case of the D's you work your head off and then lose. We won in Oregon but we didn't win nationwide."

After the election, it took Witham and Dickey about six weeks to recover — physically and mentally — while the union-run shop returned to its normal business, printing direct-mail and promotional materials for more than 500 customers, such as Nike, Tri-Met and the Oregon Food Bank.

But the two partners are growing used to the peaks and valleys, as they ride the roller coaster business of politics. Even-numbered years are 40% busier than odd years. Still, "our sales have doubled every year we've been in business," says Dickey. "The odd-numbered year has doubled from the previous odd year and the even-numbered year has doubled from the previous even year." The printers reported more than $5.5 million in sales in 2004.

In printing, as in politics, success boils down to trust. Witham and Dickey's clients expect them to follow through on their word and to get mailings printed and delivered on schedule. "The worst thing you can possibly do is have a piece of campaign mail go out after the election — it's a total waste of money. There's no way it's going to affect the outcome," says Dickey. Campaigns now seek out Dickey because he's a stickler on deadlines. "He has a by-any-means-necessary way of getting things done," says Maija Wade, director of production for Moxie Media, a political consulting firm in Seattle.

Before the formation of Witham and Dickey in 2003, Dickey, a talkative and political-minded salesman, owned BDC (Bill Dickey's Company) Printing Solutions, which specialized in political and nonprofit direct mail. Witham, the quiet and studious technical expert, owned an all-purpose neighborhood printing company, The Print Shop. The two companies merged under one name after the pair worked together to buy the Homestead greeting card company. "Without the merger, the growth wouldn't have been possible," says Dickey.

While Dickey's seasonal business offered great potential profits, he couldn't manage the growth alone. Witham's managerial expertise and traditional printing business somewhat stabilized BDC's fluctuating job flow. "We have a substantial amount of business that's not political. The odd-year business continues to grow, but it's nothing like the numbers I put up," says Dickey. That discrepancy needs to change for the business to remain stable in the future, especially if the partners hope to weather changes in the political niche market as the Internet plays a larger role in election campaigns.

Eventually, Witham and Dickey expect to show steady growth in consecutive years. They are continuing to expand their direct-mail business among nonprofit organizations, and have recently begun to sell promotional tchotchkes such as pens, T-shirts and coffee mugs. "We are deeply involved in the political printing business," says Dickey. "But we're trying all the time to move away from it to alleviate the roller coaster effect in sales."
— Libby Tucker

2 – DANIEL J. EDELMAN INC.
Location: Portland
Years in business: 2
Revenue growth: 147%
Employment growth: 267%

How does a global PR firm build a Portland identity, without brewing its own beer? That was the challenge facing Daniel J. Edelman Inc., when the company, with 40 offices worldwide, opened its first Oregon office in 2002. "I'm a Portland native and most of the people in the office are natives, but Edelman wasn't well known," says Erin Holland, executive vice president in charge of Edelman's Portland office. "We've had to establish our reputation."

The agency has established itself as a local office working to extend a global reach to Oregon companies. At the start, Edelman primarily focused on PR and marketing for technology companies, such as InFocus, a manufacturer of digital projection technology and one of the agency's first clients.

"We've been able to help them streamline their global communications by utilizing Edelman offices all over the world," says Holland. By helping local companies such as InFocus expand business, Edelman has in turn been able to grow. "It's been a mutually beneficial relationship," she says.

Edelman's Portland staff more than doubled in size last year and their business has grown to include public and community affairs, consumer retail, nanotechnology, and corporate accounts. The company now lists the Port of Portland, REI and Samsung among its clients. The staff has managed to maintain strong Portland identity. "But the day [companies] move into other cities and countries, we're there, too," says Holland.

3 – THE FRUIT COMPANY
Location: Hood River
Years in business: 5
Revenue growth: 114%
Employment growth: 111%

In 62 years of business, the success of the Webster family's Hood River pear orchard has been due to the rich volcanic soils of the Hood River valley. As with wine grapes, "the flavor [of the soil] lends itself to the particular flavor of the fruit," says Scott Webster, whose grandfather, Roy Webster, founded the orchard.

The Fruit Company, the retail end of the Webster orchard that sells fruit gift baskets on the Web, needs more than acidic soil to grow, though. It needs the pleasures of the palate to transfer through word of mouth. Webster estimates that 20% of new customers are acquired by recommendations from other satisfied customers.

"A lot of times our competitors can get away with sending a bad gift, but we really try to please the recipient," he says.

The Internet has allowed word about The Fruit Company to spread even faster and has led to steady sales growth. Webster notes that Internet usage was going up, even as the economy was going down. When The Fruit Company started selling fruit online in 1999, it sold 550 gifts. In 2004, the company sold 65,000 gifts online, driving a 114% increase in revenue from 2003.

In 2005, Webster sees tourism as the key to continued growth. The Fruit Company and the Mt. Hood Railroad are building a new $2 million fruit museum. Visitors will be able to ride the train through the valley for a tour of the Webster's orchard and packing plant and, of course, get a taste of their product.

The goal is get tourists talking, especially about pears. "We want to be known for the highest premium fruits in the world," says Webster.

4 – CONVERGENCE NETWORKS
Location: Milwaukie
Years in business: 4
Revenue growth: 107%
Employment growth: 144%

Back in October 2004, Convergence Networks' headquarters more closely resembled a can of sardines than an IT company. With 22 employees crammed into a 1,600-square-foot Portland office, and Dell computer boxes stacked to the ceiling, they were still on a six-month search for new space. And customers looking to add IT infrastructure were breathing down the company's neck. "It was a very difficult year in terms of growth," says CEO Lance Pederson.

Convergence specializes in maintaining networks for small businesses that can't afford to hire their own IT professionals.

When the company started looking for a new office in early 2004, it was on the verge of a growth explosion. "Everyone was coming out of the recession, and they decided to spend money on their networks, which were in horrible shape after three years of neglect," says Pederson. After finally finding a new headquarters space, Convergence added 13 people, mostly technicians and engineers, to their staff. The team is now responsible for managing 1,800 desktop computers in Oregon, Washington and eight other states.

"Our big, hairy, audacious goal is to have Convergence locations in every state," says Pederson.

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Copyright 2005 Oregon Business magazine